My fascination with what causes stocks to move massive amounts in short periods of time has led me to the discovery of some highly interesting short-term trading patterns I’ve rarely – if ever – seen described before.

My latest discovery is something I call the “Pyramid Pattern.” You’ll see why I called it that in a minute, but first a little background.

If you’ve read my Stock Market Miracle report, you’re already familiar with the history of how I discovered some of these explosive setups, so I’ll be brief here.

I first discovered what I call the “Baffle Play” –derived from the acronym “Breakout From a Flatline.’ Based on intense analysis of some of the biggest short-term stock market winners in history, I saw that a good many of them began their mammoth moves from a Baffle.

In my analysis leading to my Baffle Play discovery, I found another setup that – while powerful – is no match for the latent potential power of the Baffle. I call this setup the “RSVP” – an acronym for “Rare Spike on Volume and Price.”

On further analysis, I saw a lot of these setups had similar – although in most cases less powerful – follow-up moves a few days after the initial major spike in price. That discovery led to my whole “Earthquake and Aftershocks” system of swing trading these fast-moving stocks.

I’ve named one of the main “Aftershock” patterns the ARM Play – an acronym for “Awesome Rising Method.” The ARM Play is derived from a classic pattern from traditional Japanese candlestick analysis called the “Rising Method.” The ARM is basically a Rising Method on “steroids.”

The ARM Play Aftershock can itself produce one-day gains of 8 – 20% and more. So the next step in my analysis was to see if I could tell how to anticipate the Aftershock – and bag that nice one-day gain before the stock ran away again.

That analysis led me to the discovery of what I call the Holy Grail setup – named because when the setup appears, it’s almost a sure thing to see the stock reignite one to three days later, creating the ARM.

The Holy Grail is simply a Doji – preferably a long-legged variety – formed in the pullback after the initial Earthquake move. It can also be a Spinning Top – just some candlestick indicating indecision between the bulls and bears, and perhaps signaling a change in direction of the stock – which is usually back strongly to the upside.

I’ve also found when the Doji forms at or near the 10ema (10-day exponential moving average) in the pullback, it’s almost a sure thing. Thus the “Holy Grail.”

And now we come to the Pyramid Pattern.

I discovered the Pyramid Pattern just a few weeks ago in a sector of stocks that just started going wild to the upside in price and volume action. While I’ve not tested the pattern in other areas, I suspect it will be seen in any sector represented by small stocks easily influenced by speculators.

The sector recently exhibiting these characteristics is the Small Oil & Gas sector.

The reason for speculation is easy to understand – with the skyrocketing price of crude oil, it’s just common sense to look for small stock plays in that area that can be suddenly highly attractive to speculators.  The Small Oil & Gas sector suited that scenario perfectly.

Some of these stocks produced gains hard to believe – 300-400% profits were common, with a 10-bagger (1,000% gain) in just a few weeks possible.

I call the distinctive price and volume action during these enormous gains the Pyramid Pattern.

The Pyramid Pattern has a double meaning. I first discovered the pattern studying the price and volume action of PDO – Pyramid Oil. Plus, the price action on the chart looks like the left side of a pyramid (and the whole pyramid can be formed! The pullbacks after the final price explosions can be severe. You have to be quick taking profits with the Pyramid Pattern).

The move starts out as a Baffle Play. You then have three waves of action, with Wave 3 being the most explosive.

The Pyramid Pattern is a little hard to visualize, so I created a video with the complete description and several examples (see below).

Charts (or data) produced by Telechart 2007, which is a registered trademark of Worden Brothers, Inc., Five Oaks Office Park, 4905 Pine Cone Drive, Durham, NC 27707.Ph.(800) 776-4940 or (919) 408-0542. www.worden.com.

Anyway, I’ll be on the lookout for other sectors with Pyramid Pattern setup potential! And as always, I’m in the Trade Analysis Lab each and every day to discover new, explosive setups. I’ll be posting my findings here.

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